What should be considered in determining workers’ seniority bonuses?

Following social partners’ differing interpretations of Article 129 of Employment Relationships Act (ERA-1) in relation to the workers’ length of service concerning the seniority bonuses, the Ministry issued a non-binding statement, which contradicts recent case-law. This is why all eyes are now on the Supreme Court which needs to address this issue in the judicial review, which has already been granted leave.

Article 129 of the Slovene Employment Relationship Act (Zakon o delovnih razmerjih, ERA-1) provides that a worker is entitled to a seniority bonus, the amount of which is determined in a branch collective agreement (“BCA”). Pursuant to Article 222 of the ERA-1 workers who had the right to a seniority bonus (of at least 0.5 % of their basic salary for every full year of service) when ERA-1 entered into force, shall retain such bonus, unless provided otherwise in the BCA. Based on the grammatical interpretation, these ERA-1 provisions could be interpreted to mean that the BCA may lay down a different amount for seniority bonuses or that only the length of service with the latest employer (and not all previous employers) is to be considered.

In its legal opinion no. 1001-381/2018-2 (which was supported by the Association of Employers of Slovenia), the Ministry for Family, Work, Social Affairs and Equal Opportunities (“Ministry”) has corroborated the grammatical interpretation, in accordance with which the issue of the length of service (considered when calculating the seniority bonuses amount) may be regulated in the BCA in a less favourable way for workers. This opinion was a result of the negotiation process concerning the last reform of the labour market regulations, during which the ERA-1 was also amended. It was agreed during the negotiations that the amendments to the ERA-1 provisions shall also include amendments with respect to which service is to be considered when determining the seniority bonus. The Ministry also discovered that many collective agreements have used this possibility, meaning that also the trade unions were undoubtedly aware of the legislator’s intentions.

The legal opinion described above contradicts recent case-law of the Higher Labour and Social Court of Slovenia (“VDSS”), which has taken the position in two decisions (cases nos. Pdp 916/2017 and Pdp 935/2017) that the BCA may determine lower seniority bonuses, but it may not determine a shorter length of service on the basis of which a worker’s seniority bonus is calculated. The court based its decision on the idea that if the legislator indeed only meant to consider the worker’s length of service with his last employer, the provisions would explicitly and unambiguously state this. According to the VDSS, employers should consider the working period of the worker with all the previous employers, despite the potentially different provisions in the BCA.

An application for the judicial review has been filed against the VDSS judgment in the case no. Pdp 916/2017. The Supreme Court of Slovenia issued a decision no. VIII DoR 56/2018 granting leave to the judicial review regarding the question of whether the first paragraph of Article 129 of the ERA-1 should be interpreted as to entitle workers to seniority bonuses for the entire length of service or as to allow the BCA to determine this right in a way that is less favourable for the workers.

The court has not yet decided on the judicial review; however, we are awaiting the decision with great interest as it will presumably offer a more specific answer regarding this issue and offer a clear position on which opinion should be followed, that of the VDSS or the one of the Ministry.

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